My right honourable friend the Financial Secretary to the Treasury (Stephen Timms) has made the following Written Ministerial Statement.

This Statement, which I am making also on behalf of my right honourable friend the Secretary of State for Work and Pensions (Yvette Cooper), sets out the plans of our two departments to work together to recover more of the debt which is owed to the taxpayer.

For some three years our two departments have been taking forward a programme of joint working, covering a range of areas where, together, we can deliver better service to our customers and better value to the taxpayer than we could if we worked separately. One such area relates to the debts which are owed to both HM Revenue and Customs (HMRC) and the Department for Work and Pensions (DWP)—often by the same individuals. Accordingly, we have been examining:

ways in which we can recover debts more cost effectively (for customers and departments) from customers who owe money to both our departments;

joint tracing services to locate customers with debts owing to one or both departments for whom we have no current address; and

a simpler payment method for customers owing a debt to HMRC and who are in receipt of benefit payments from DWP.

As part of this programme of work, from the spring of 2010 HMRC will start to trial the recovery of working tax credit and self-assessment debts through deductions from DWP benefit payments. Participation in the trial will be voluntary. The new service will be offered to people who cannot afford to settle their debts with HMRC in one go and who would prefer to pay them off through a voluntary deduction from their benefits.

To do this, DWP intends to make a regulation under the Social Security (Claims and Payments) Regulations 1987 to enable DWP to collect HMRC debts. This regulation will be subject to scrutiny by the Social Security Advisory Committee, and both departments will consult with customer representatives when designing the trial.

The trial will enable our two departments to assess the effectiveness of collecting HMRC debts via deductions from DWP benefit payments as well as to test our customers’ response to this method of payment. The trial will involve customers who are in receipt of benefit and whose tax credit overpayment or self-assessment debt is less than £1,000. It will offer customers whose tax credit award has ended or who have a self-assessment debt the option of paying back the debt via deductions from benefit payments as an alternative to current HMRC payment methods.

Both departments will evaluate the results of the trial before deciding whether to make this a permanent payment option.